In a thorough and thoughtful Report and Recommendation, Magistrate
Judge Dolinger has recommended that defendants' motion for summary
judgment be granted as to all claims against John Mulvehill. He has
recommended that the motion be granted as to all claims against Urban
Mulvehill except the portion of plaintiffs' breach of fiduciary duty
claim which alleges that Urban Mulvehill failed to disclose to plaintiff
that he was receiving a portion of John Mulvehill's fee. Finally, he has
recommended that John Mulvehill's motion for sanctions and preclusion of
the use of certain evidence be denied. No objections have been filed
within the ten days provided by 28 U.S.C. § 636 (b)(1).

After carefully reviewing the attached Report and Recommendation, I
accept it in its entirety.

SO ORDERED.

REPORT & RECOMMENDATION

DOLINGER, United States Magistrate Judge.

To The Honorable Miriam Golden Cedarbaum, District Judge:

Following a car accident in which his wife was killed and his son
injured, Richard Schweizer retained attorney John Mulvehill to pursue a
wrongful-death and personal-injury lawsuit against the driver of the
other vehicle involved in the collision and the driver's employer. After
a suit was filed in federal court, the parties reached a settlement by
which the plaintiff was to receive approximately $1 million.

On behalf of his son and himself, Schweizer now sues his attorney in
that previous action and the attorney's cousin, Urban Mulvehill, Esq.,
with whom John Mulvehill was to share fees on the wrongful-death claim.
Following completion of discovery, defendants have moved for summary
judgment on all of plaintiff's claims. In addition, John Mulvehill seeks
an order (1) precluding plaintiff from using certain salary information
obtained in response to a non-party subpoena and (2) imposing sanctions
on plaintiff in connection with the subpoena.

A. Plaintiff's Claims

Plaintiff filed this lawsuit in December 1995, asserting five claims
against John and Urban Mulvehill, all related to their representation of
him in Schweizer v. Skyway Transportation, 90 Civ. 0979 (S.D.N.Y.) (JFK)
("the underlying action"). First, Schweizer alleges that both attorneys
committed legal malpractice and "gross legal malpractice" (1) by
negligently preparing and prosecuting the underlying action, (2) by
failing to inform him that he might compensate John Mulvehill other than
through a one-third contingency arrangement, and (3) by failing to
disclose conflicts of interest, presumably including the fact that Urban
Mulvehill would share a part of the contingency fee recovered and that
John Mulvehill was employed by an insurance company. (See Compl. ¶¶
59, 74-78).

Plaintiff's second claim is for breach of contract. He asserts
principally that John Mulvehill breached the terms of the retainer
agreement by settling the underlying action for $1 million when he had
promised to prosecute the case for more than that. (Id. at ¶ 80). He
also asserts that the retainer agreement was breached for the reasons
stated in his malpractice claim. (Id. at ¶¶ 81-84).

Third, plaintiff asserts a claim for fraud, alleging that the
defendants made misrepresentations to him, that he relied upon those
misrepresentations, and that he was thereby damaged. (Id. at ¶¶
86-88). Specifically, he alleges that defendants either misstated or
withheld the following information: (1) they did not disclose that there
were fee arrangements besides a contingency by which plaintiff could have
agreed to pay John Mulvehill; (2) John Mulvehill falsely stated that he
would prosecute the underlying action for more than the $1 million limit
of the insurance policy; (3) defendants concealed conflicts of interest
in handling his case; (4) defendants misled plaintiff into believing that
the underlying action was a more complex case than it was; (5) defendants
misrepresented that it would be impossible to recover more than $1
million from the defendants in the underlying action; (6) defendants
falsely asserted that plaintiff had made statements that he had not; and
(7) defendants failed to disclose that Urban Mulvehill would receive a
fee for referring the underlying action to John Mulvehill. (Id. at ¶
86 (A-G)).

Fourth, plaintiff asserts that defendants violated section 487 of the
New York Judiciary Law by misleading the Surrogate's Court through the
presentation of false information and the omission of material
information. (Id. at ¶¶ 90-92). These alleged misrepresentations and
omissions are the same as those alleged in connection with the fraud
claim. (Id. at ¶ 90 (A-G)).

Finally, plaintiff makes a claim for breach of fiduciary duty. He
alleges that defendants were in a fiduciary relationship with him and
that by acting in their own interests in settling the case for the policy
limit, and by withholding information, including the existence of a
referral fee and John Mulvehill's employment, the attorneys breached that
duty. (Id. at ¶¶ 94-100).

Plaintiff demands $1 million in compensatory damages for each of his
claims and $3 million in punitive damages for each claim except the one
for breach of contract. (Id. at 27-28 (¶¶ 1-5)).

B. Defendants' Summary Judgment Motion

Defendants have filed a motion seeking summary judgment on all of
plaintiff's claims. First, defendants assert that the claims of legal
malpractice, breach of contract and breach of fiduciary duty are barred,
under the doctrine of collateral estoppel, because the fairness of the
attorney's fee has already been determined by the Surrogate's Court of
Orange County when it approved the settlement in the underlying action.
(Def's Mem. at 17-19).

Third, defendants contend that because the results obtained in the
underlying action were in the client's best interest, plaintiff has
failed to establish a breach of fiduciary duty. (Id. at 25).

Fourth, defendants contend that insofar as plaintiff's allegations of
fraud and breach of contract are indistinguishable from the malpractice
claim, they are barred under New York law, (Id. at 30-31).
Alternatively, they argue that, in any event, the fraud claim cannot be
sustained because plaintiff is unable to show injury from any alleged
misrepresentations or omissions. (Id. at 26-29).

Fifth, defendants contend that plaintiff cannot establish that they
violated New York's Judiciary Law (id. at 32-33), and that, in any
event, this claim is barred by the statute of limitations. (Id. at
34-35). Finally, defendants contend that plaintiff's claim for punitive
damages should be dismissed.

We conclude that plaintiff has failed to demonstrate a triable issue of
material fact with respect to any of his claims, except the claim that
Urban Mulvehill breached his fiduciary duty in failing to disclose that
he would share in the contingency fee payable to John Mulvehill.

C. Facts and Prior Proceedings

On May 16, 1989, plaintiff's wife, Karen Schweizer, was killed when a
tractor-trailer crossed the center line of a two-lane roadway and hit her
vehicle head-on. (Compl. at ¶ 11; Decl. of Cheryl Riess Curtis,
Esq., dated April 6, 1999 ("Pl. Decl.1"), Ex. 1 (police accident report)
at second page). Mrs. Schweizer was 35 at the time and a homemaker,
although she had apparently planned to go back to work when her son
started school. (See Dep. of Richard T. Schweizer at 5-6, 11-12).
Plaintiff's son, Scott Schweizer, then five years old, was a passenger in
his mother's car when the accident occurred. (See Compl. at ¶ 12). He
suffered a broken arm and other minor injuries, as well as some degree of
psychological trauma. (See Pl. Decl. 1, Ex. 4 (hospital report) & Ex. 7
(January 5, 1999 psychiatric evaluation by Dr. Lawrence Scheff); Decl. of
Geoffrey W. Heineman, Esq., dated April 27, 1999 ("Def.Decl.2"), Ex. E
(October 6, 1990 evaluation by Dr. Scheff)).

The tractor-trailer that was involved in the accident was owned by
Skyway Transportation Incorporated ("Skyway"). (See Dep. of James J.
Lenihan, President of Skyway, Jan. 6, 1998, at 42-43). It was insured for
$1 million by American Reliance Insurance Companies ("Reliance"). (See
id. at 43, 47; see also Pl. Decl. 1, Ex. 14 (Oct. 19, 1989 letter to J.
Mulvehill from Lesley Klotz, Assistant Casualty Claims Supervisor for
Reliance)).

At the second meeting with John Mulvehill, in September 1989, Schweizer
expressed concern about what he correctly believed to be the $1 million
limit of Skyway's insurance policy. According to plaintiff, he received
some indication from Mulvehill that more than $1 million was potentially
recoverable. (See Aff. of Richard T. Schweizer, sworn to April 6, 1999,
at ¶ 2 (Mulvehill expressly represented that the policy limit was not
a limit on recovery); Schweizer Dep. at 81, 165 ("Q: When did John
Mulvehill promise you to prosecute the case for more than the $1 million
policy? A: When we had our meeting on the 23rd of September 1989, he
mentioned it was possible to hold the insurance company liable for an
amount more that the million dollar policy limit."), 209 ("When I signed
the retainer [John Mulvehill] led me to believe that it was possible to
achieve a settlement greater than the limit — the assumed limits of
the insurance policy, i.e. $1 million,"), 211 ("he said to me `Don't
worry' [about the policy limit]"), 340, 516).

During his discussions with Mulvehill, Schweizer expressed his interest
in retaining a lawyer on a more favorable basis than a flat one-third
contingency fee. (See, e.g., Schweizer Dep. at 263; Dep. of John H.
Mulvehill ("JHM Dep."), at 611 (Schweizer asked if John Mulvehill would
consider a 30% contingency)). Mulvehill indicated that 33 1/2 percent was
the standard fee, and that although Schweizer might be able to find a
lawyer to take less than one-third, that was unlikely.*fn1 (Schweizer
Dep. at 58; see also id. at 30 ("John [Mulvehill] said that all other
personal injury attorneys have a one-third contingency fee, and he showed
me the form") (emphasis added)). Schweizer's pursuit of either another
attorney or a more favorable payment term was limited; he interviewed bne
other attorney, who also proffered a standard one-third-fee form (see
Schweizer Dep. at 65-66), before indicating that he wished to retain John
Mulvehill.*fn2

Sometime after the first meeting with John Mulvehill, but before the
second meeting in September 1989 — and the signing of the retainer
— plaintiff received a
settlement offer from American Reliance of at least $600,000.00.*fn3
(Compl. at ¶ 27; Schweizer Dep. at 71-72, 75, 78, 80; JHM Dep. at
697). Plaintiff understood the offer to be for cash — as opposed to
any form of structured settlement — and decided not to accept it,
choosing instead to retain John Mulvehill because, he alleges, Mulvehill
had told him that he "shouldn't be concerned about the limits of the
[insurance] policy in that it's possible to hold an insurance company
liable for an amount greater than the limits of that policy." (Schweizer
Aff. at ¶¶ 3, 8; Compl. at ¶¶ 38-39; Schweizer Dep. at 81).

During the time of Schweizer's preliminary negotiations with and
subsequent representation by John Mulvehill, Mulvehill was working
full-time as an attorney for Liberty Mutual Life Insurance Company,
primarily defending its insureds. He had been a salaried employee of
Liberty Mutual since 1961, in legal departments that bore the names, of
the insurance company's most senior in-house counsel. (JHM Dep. at
156-58). From 1974 to 1991 Liberty Mutual's legal department operated
under the name Mulvehill & O'Brien. (Id. at 200-01). Mulvehill also
maintained a solo private practice, with a letterhead bearing his name
and his home address. (See, e.g., Pl. Decl. 1, Ex. 24). In that
practice, Mulvehill handled personal-injury cases as well as other legal
matters. (See JHM Dep. at 202-07).

In 1991, when it came to the attention of Liberty Mutual that John
Mulvehill was taking on cases beyond those he was handling for its
insureds, the company asked Mulvehill to resign. (See Pl. Decl. 1, Ex. 26
(May 17, 1991, letter from A. Paul Goldblum to John W. Allen, Esq.) &
Ex. 19 (copy of Liberty Mutual's no-outside-practice policy)). Plaintiff
did not know of John Mulvehill's relationship with Liberty Mutual (see
JHM Dep. at 369),*fn4 and asserts that had he known that Mulvehill had
full-time employment and was primarily involved in defending
personal-injury cases for an insurance carrier, he would not have retained
him. (Schweizer Aff. at ¶¶ 5, 6).

Schweizer first became aware of this arrangement when he received a
closing statement in February of 1992, following the Surrogate Court's
approval of the Offer to Compromise, indicating that Urban Mulvehill was
receiving approximately $63,000. (See Schweizer Dep. at 215, 233, 290).
In the period between the retention of John Mulvehill and the settlement
of the underlying action, plaintiff had repeated contacts with Urban
Mulvehill and his firm, O'Neill, DiManno & Kelly, in connection with the
underlying action. Specifically, meetings took place in the conference
room at O'Neill, DiManno (id. at 309, 320); plaintiff picked up checks
and other documents there (id. at 284), and was forwarded checks and.
other documents by the firm (id. at 286); plaintiff received
correspondence from Urban Mulvehill (id. at 292 (Urban Mulvehill advised
plaintiff that the Surrogate had not yet acted on the application for
approval of the compromise)); and many letters that plaintiff saw
indicated that carbon copies were being sent to Urban Mulvehill. (See,
e.g., id. at 281, 310, 312, 315). Plaintiff contends that he believed
that John Mulvehill was merely keeping his cousin apprised of
developments in the case (id. at 203 (as a "professional courtesy")), and
that Urban Mulvehill's office was convenient to his own downtown office
(id. at 117, 285, 287) and to the Southern District courthouse, where
filings were made. (Id. at 93).

In November 1989 Richard Schweizer was appointed administrator of his
wife's estate by the Surrogate's Court of Orange County. In February
1990, John Mulvehill, on behalf of Schweizer, filed a personal injury and
wrongful death action in this Court against Skyway and George Bell,
seeking damages of $23,500,000. (Def. Decl. 1, Ex. J (Compl. in Schweizer
v. Bell, 90 Civ. 0979 (S.D.N.Y.) (JFK))).

Among the tasks that John Mulvehill performed in connection with the
underlying action, he engaged in some investigation of Skyway's assets.
(See JHM Dep. at 1216; Pl. Decl. 1, Ex. 23 (Aug. 23, 1990 letter from U.
Mulvehill to J. Mulvehill conveying information regarding possible
coverage by another insurance carrier and forwarding Dunn & Bradstreet
report on Skyway)). At the time of the accident, Skyway's assets
consisted of five trucks, a house trailer, a pick-up truck, tools and
equipment (see Jan. 6, 1998 Lenihan Dep. at 51-55), and its debts
consisted of taxes owed to the IRS and to the State of New Jersey. (See
id. at 72, 120). It does not appear that it had liability coverage beyond
the Reliance policy (see, e.g., Jan. 26, 1998 Lenihan Dep. at 43),
although the records at the Interstate Commerce Commission indicated that
Skyway was insured by Aetna for $750,000.00. (See id. at 43, 57; P1.
Decl. 1, Ex. 23 (Aug. 23, 1990 letter from U. Mulvehill to J.
Mulvehill)).

In 1993, two years after the settlement of the underlying action,
Skyway was dissolved, and the company was re-incorporated as Highway
Freight Lines Incorporated ("Highway"), apparently in an effort to reduce
the amount of its insurance premium. (See Dep. of James J. Lenihan, July
30, 1998, at 43-44; pl. Decl. 1, Ex. 28 (Corporate Resolution of Skyway
dated Aug. 6, 1993)). Skyway "sold" its five tractor-trailers to Highway
for $50,000 and the proceeds were used to pay off tax liens, (See Jan.
6, 1998 Lenihan Dep. at 120, 130). A house trailer and pick-up truck were
discarded due to age. (See id. at 53, 55).

In the course of litigation, John Mulvehill retained the services of
Thomas Kershner, an economist, in order to evaluate the economic loss
resulting from the death of Karen Schweizer. The economist valued that
loss, discounted to present value, at $1,042,462.*fn7 (Def. decl. 1,
Ex. L (Appraisal of Economic Loss) at 23). Defendants in the underlying
action also obtained an analysis of the economic loss, and their
economist valued the loss, discounted to present value, at $357,975.
(Id., Ex. M (Report of Edmund Mantell, PhD.) at 3).

In April 1991, Schweizer and the two Mulvehills met at the offices of
O'Neill, DiManno & Kelly and discussed the underlying action. (See
Schweizer Dep. at 133; USM Dep. at 394-98, 890-91). At the meeting they
discussed the risks of going forward with the trial, the plaintiffs' and
defendants' respective expert reports analyzing economic loss, the
possibility that Skyway would present some evidence of contributory
negligence on the part of Mrs. Schweizer, the evidence of her
instantaneous death — affecting plaintiff's prospects of recovering
for pre-impact terror — and the likelihood of being able to recover
on a judgment in excess of the existing insurance coverage. (See USM
Dep. at 395-96, 891; see also Schweizer Dep. at 145-53). At the
conclusion of the meeting it was decided that plaintiff, by his
attorneys, would send a "bad-faith letter"*fn8 to Reliance, demanding a
settlement equal to Skyway's policy-limit. (See Schweizer Dep. 153-55;
USM Dep. at 396). In May 1991, Reliance offered to settle the underlying
action for $985,000. This sum reflected the $1 million limit of Skyway's
policy, less $15,000 already paid to plaintiff for damage to his vehicle
pursuant to no-fault insurance coverage. (Schweizer Dep. at 166, 171,
172, 176, 225). Plaintiff agreed to the offer, with an allocation of
$50,000 for Scott's personal injury claim and $935,000 for the
wrongful-death claim. (Id. at 225, 227).

At the next appearance in Surrogate's Court, Judge Owen noted that he
had both a petition requesting the Court to approve the offer of
compromise and the letter from Mr. Schweizer indicating reservations
about the attorney-fee arrangement. (Def. Decl. 1, Ex. O (Sept. 9, 1991
Tr.) at 3). The court asked Schweizer whether he wanted to consult with
counsel other than John Mulvehill, but the plaintiff declined. (Id.). The
Court then adjourned the proceedings to allow Mr. Schweizer to consult
with Thomas N. O'Hara, Esq., Scott's guardian ad litem., and to allow
Mr. O'Hara the opportunity to prepare a report on the adequacy of the
settlement and the appropriate attorney's fee for that portion of the
settlement allocated to the child's wrongful-death claim. The Judge also
provided John Mulvehill the opportunity to submit a memorandum of law as
to the fee issue. Id.

Mr. O'Hara submitted a revised report*fn12 on September 25, 1991 in
which he asserted that the settlement was "prudent" in light of the
uncertainty of a trial outcome and "the unlikelihood of collecting any
award in excess of the policy limits." (Id., Ex. R (September O'Hara
Report) at ¶ 16). The guardian ad litem noted that the petition for
approval of compromise contained language fixing the attorney's fee at
$309,267.86, and that, because the petition was verified by Mr.
Schweizer, he was bound by the judicial admission. (Id. at ¶¶ 27-28).
Noting further that both the admission and the retainer agreement were
binding only on Schweizer himself — and not on his son — the
guardian ad litem recommended that the fee for Scott Schweizer's share of
recovery should be fixed at only 25 per cent.*fn13 (Id. at ¶ 34).

In response to the Surrogate's invitation, John Mulvehill submitted an
Attorney's Affirmation outlining the work he had performed in connection
with the underlying action, including conducting interviews, taking
depositions, selecting experts, and investigating defendants's insurance
coverage. (Def. Decl. 1, Ex. N at 1-4). Mulvehill also outlined his
"professional" opinion regarding the adequacy of the compromise value, the
risks inherent in proceeding to trial and the relative prudence of the
settlement. (Id. at 7-8).

Urban Mulvehill also submitted an affidavit, indicating that he had
referred Schweizer to John Mulvehill (Def. Decl. 1, Ex. D (Aff. of U.
Mulvehill, sworn to Sept. 16, 1991) at ¶ 2), that the plaintiff had
showed an interest in interviewing John Mulvehill but that Schweizer also
had had the names of "five or six other attorneys" whom he wished to
interview as well (id. at ¶¶ 4-6), and that plaintiff had in fact
interviewed three attorneys (id. at ¶ 7) before retaining John
Mulvehill. In his affidavit, Urban Mulvehill recounted that his firm had
been retained in connection with plaintiff's estate matters (id. at
¶ 8), and set forth the nature of the work that he had performed in
connection with the wrongful-death action (id. at ¶ 9) and his
opinion that the settlement was "the best possible result." (Id. at ¶
18). The affidavit contains no mention, however, of the 80-20
fee-splitting arrangement between the two attorneys.

At a subsequent proceeding in Surrogate's Court, when asked if there
was anything else he wished to submit, Schweizer responded in the
negative. (Def. Decl. 1, Ex. S (Tr. of Sept. 30, 1991) at 2). On November
22, 1991, Surrogate Owen issued a written decision. The Surrogate adopted
the guardian ad litem's recommendation regarding the one-fourth fee for
the Portion of the recovery allocated to Scott and found that Richard
Schweizer was bound by the one-third fee retainer agreement entered into
with John Mulvehill. (Id., Ex. T at 3-4). The Surrogate subsequently
issued a decree restating his ruling and noting that Schweizer had
objected to the fee, that the guardian ad litem had submitted a report,
and that John Mulvehill had filed two affirmations and Urban Mulvehill
had filed an affidavit in the matter. (Id., Ex. O at 3).

In December 1995, Richard Schweizer commenced this action, asserting
his current claims. On April 30, 1999 defendants filed a motion for
summary judgment on all claims, which we here address.

ANALYSIS

I. Standard of Review on Summary Judgment

The court may enter summary judgment only if it concludes that there is
no genuine dispute as to any material fact and that, based on the
undisputed facts, the moving party is entitled to judgment as a matter of
law. See, e.g., Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998);
D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.), cert. denied,
524 U.S. 911, 118 S.Ct. 2075, 141 L.Ed.2d 151 (1998). It is axiomatic
that the role of the court on such a motion "`is not to resolve disputed
issues of fact but to assess whether there are factual issues to be
tried, while resolving ambiguities and drawing reasonable inferences
against the moving party.'" Miner v. City of Glens Falls, 999 F.2d 655,
661 (2d Cir. 1993) (quoting Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11
(2d Cir. 1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d
762 (1987)); Coach Leatherware Co., Inc. v. AnnTaylor, Inc., 933 F.2d 162,
167 (2d Cir. 1991).

If the movant carries his initial burden, the burden shifts to the
party opposing the motion to demonstrate a genuine dispute as to one or
more of the material facts. See Celotex, 477 U.S. at 322, 106 S.Ct.
2548; B.F. Goodrich v. Betkoski, 99 F.3d 505, 521 (2d Cir. 1996), cert.
denied sub nom. Zollo Drum Co., Inc. v. B.F. Goodrich Co., 524 U.S. 926,
118 S.Ct. 2318, 141 L.Ed.2d 694 (1998). In doing so, the opposing party
cannot rest on "mere allegations or denials" of the facts asserted by the
movant, Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 526 (2d Cir.
1994), nor can he rely on his pleadings or on merely conclusory factual
allegations. He must also "do more than simply show that there is some
metaphysical doubt as to the material facts," Matsnshita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89
L.Ed.2d 538 (1986); B.F. Goodrich, 99 F.3d at 521. Rather, he must
present specific evidence in support of his contention that there is ...

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